Form 16 is a certificate issued by employers to their employees. It shows that tax deducted at source (TDS) as per the government norms has been deducted on behalf of the employees.
The form reflects a detailed summary of the total salary paid to the employees and the applicable TDS that has been deducted.
The form comprises important information that is needed at the time of filing your income tax returns (ITRs). Your employer will issue it on or before 15th June after the end of the financial year during which the tax has been deducted. Read on to understand what is Form 16 in detail.
What are Form 16 Part A and Part B?
The form is divided into the following two parts.
Part A
Wondering what is Form 16A? Well, it summarizes the tax that has been collected by your company from your salary and deposited with the government on your behalf.
It is a duly certified copy that shows details on the TDS deducted and deposited with the relevant government authority. It comprises the following details.
- Personal information of the employer and employee, such as name, address, permanent account number (PAN), and company Tax Deduction and Collection Account Number (TAN)
- Assessment year, which is the year in which your income is being assessed
- Employment period during the financial year when you were working with the company
- Salary paid summary
- The date on which TDS was deducted and paid to the government authority
- Summary of TDS and quarterly deposit with the Income Tax Department
- TDS payment acknowledgment number
You may download Form 16 Part A through the TDS Reconciliation Analysis and Correction Enabling System (TRACES) portal. Ensure all pages are digitally or manually signed by your employer.
Part B
This is a consolidated statement showing details, such as salary, other income you disclosed to your employer, and tax amount due and paid, if applicable.
In addition to your PAN and name, the following information is included in the 16B form.
- Salary received, broken down as leave travel allowance (LTA), gratuity, house rent allowance (HRA), leave encashment, and others
- Exemptions allowed under section 10 of the Income Tax Act, 1961, which include HRA, medical bills, children’s education, and hostel expenses
- Gross income from salary and other heads like income from house property and much more
- Deductions under sections 80C, 80CCC, and 80CCD of the Income Tax Act, 1961 for investments in products like life insurance, public provident fund (PPF), tax-saving mutual funds, and others
- Deductions under section 80D (health insurance premium), 80E (interest on education loan), 80G (donations), and other sections of the Income Tax Act, 1961
- Net taxable salary after subtracting total deductions from gross income; income tax is payable on this amount
You do not need Form 16B downloaded separately as it is included in the TDS certificate issued by your employer.
Types of Form 16
There are two types, which include Forms 16A and 16B. The former is a certificate that shows all TDS deducted on income other than salary.
It provides details on total income earned and TDS amount deducted and deposited. Details, such as the name and address of deductor and deductee, PAN and TAN, and TDS deposited challans are included in this form.
Form 16B shows the TDS deducted on sale of real estate property and reflects the TDS deducted by the buyer and deposited with the relevant government authority.
Buyers have to deduct TDS at the rate of 1% from the total amount payable to the sellers, which must be deposited with the government.
Eligibility criteria for Form 16
As per the regulatory guidelines issued by the Ministry of Finance, every individual who is salaried and falls in the income tax bracket is eligible to receive this form.
If the total salary is less and the employer does not have to deduct TDS, the company is not obligated to issue this form.
However, most companies issue the TDS certificate even if the employee is not falling in the tax bracket. The form comprises consolidated information of the total earnings and other details for these employees.
The process to download Form 16
Only the employers can download Form 16 online, through the TRACES portal. Here is the procedure:
Why is Form 16 required?
This form is required for the following reasons.
- It is proof that your company has deducted the TDS from your salary and deposited it with the government
- The form is required by banks and other financial institutions when you apply for a loan
- It is helpful while filing your returns via the efiling portal
Why is Form 16 important for a salaried employee?
This form is important for salaried individuals for the following reasons.
- Details in the form are needed while filing ITR
- It helps verify that an accurate amount of tax is deposited with the government authority based on the information available in Form 26AS
- Works as proof in case there is any scrutiny in the future
- Financial institutions accept this form as valid income proof while applying for a loan
- New employers may need this from your previous employer during the onboarding procedure needed for accurately calculating the tax
- International visas like the Schengen visa require this form at the time of application
What to check in Form 16 while filing Income Tax Return?
After your employer issues the form, it is your responsibility to check the accuracy of the details.
You must verify that all personal information, total income, and TDS are correctly shown on this income tax Form 16. Moreover, ensure your PAN is right.
If there is any error, you must get it rectified by your company immediately.
Uses and advantages of Form 16
- Works as salary statement for employees
- Provides clear computation of tax payments and refunds
- Acts as income proof
- Helps check your tax-saving investments
Understanding Form 16 and Form 26AS
Form 16 shows the TDS deducted from your salary income and is issued by the employers. On the other hand, Form 26AS is a consolidated tax credit statement issued under Section 203AA of the Income Tax Act, 1961.
Frequently Asked Questions (FAQs)
How do you get Form 16?
You will get it from your employer and even if you have resigned during the year, your previous employer is responsible for issuing this form.
How is Form 16 generated?
The TDS Central Processing Center (CPC) generates this form based on the quarterly TDS and tax collected at source (TCS) statements. The deductor must raise a request on the TRACES portal.
Can you get a duplicate copy if you lose the original Form 16?
Yes, you can ask the deductor to issue a duplicate if you have misplaced the original form.
Who will issue Form 16 if you are a pensioner?
The bank that receives your pension is responsible for issuing this form to you. You will not receive it from your previous employers.
If you do not receive Form 16, do you not have to pay tax and file ITR?
You are responsible for paying the income tax and filing ITR on time. If your total income exceeds the minimum exemption limit, you have to pay the tax even if your employer does not deduct TDS.
This is a companion discussion topic for the original entry at https://jupiter.money/resources/what-is-form-16/